Cotton use to rise fast, led by textile growth

Second from right, ICA President Jordan Lea speaks during an interview with The Daily Star yesterday. Photo: Star

Bangladesh's annual cotton consumption will accelerate 50 percent to six million bales in four years as garment exports are on the rise, the International Cotton Association (ICA) said yesterday.

Bangladeshi spinners now consume more than four million bales of imported cotton a year, with the growth in consumption rate being between 10 percent and 15 percent per annum. 

Jordan Lea, president of the ICA, the Liverpool-based policymaking body for cotton trade, said Bangladesh's garment industry is growing very fast. "If the current growth continues, it will move Bangladesh to a different category from India and China,” he said while talking about the country's future in garment business.

The garment export-led growth will make Bangladesh the third, fourth or fifth largest cotton consumer in the world, Lea told The Daily Star in an interview at the newspaper's office in the capital.

Lea, along with his colleagues, is in Dhaka now to hold meetings with the spinners of Bangladesh.

Bangladesh's garment market has a bright future, while markets like Korea, Japan and Taiwan are shrinking, he said.

Bangladesh is the second largest garment exporter and second biggest cotton importer worldwide.

The ICA began its journey more than 170 years ago when a group of cotton brokers created a set of bylaws and rules to help regulate the sale and purchase of raw cotton.

Today, 85 percent of the world's cotton is traded internationally under ICA bylaws and rules. The rules have changed with time, but their aim remains the same -- to create a safe trading environment.

The ICA now has more than 550 members and its membership spans all corners of the globe and represents all sectors of the supply chain. It offers a range of services -- arbitration, training, trade and networking events, plus cotton testing and research.

Kai Hughes, managing director of the ICA, said: "We look forward to strengthening the bonds between the ICA and the Bangladeshi spinning and textile sectors."

Bangladesh is one of the top 10 cotton consumers worldwide. The ICA wants to support Bangladesh in the way of bigger garment business, he said.

"Bangladesh needs undisrupted supply of cotton so its tremendous growth continues. It is also important for Bangladesh as it does not produce cotton. So, Bangladesh needs protection from the ICA," said Jean-Marc Derossis, first vice president of the association. 

Derossis said a number of Bangladeshi groups have established very good production facilities in the last few years investing a huge amount of money.

The total investment in the country's primary textile sector is around four billion euros. Local spinners can supply 90 percent of yarn for knitwear sub-sector and nearly 40 percent of fabrics for the woven sub-sector.

Derossis said China absorbed all the surpluses of cotton in the last three years. However, import to China is going to be reduced this year because of a change in domestic policy in the biggest consumer of cotton.

"So, there will be a lot of surplus available which will provide more options to countries such as Bangladesh."

He said cotton prices have gone down by 25 percent in the past five months because of the surplus as well as the shift to staple fibre or polyester by garment makers from cotton due to sudden volatility in cotton market worldwide.

Derossis agreed that the cotton prices were kept artificially high in the last three years. As a result, cotton has lost its market share to polyester to a bit, especially after 2010-11.

"As prices have come down, spinners are shifting back to cotton again. Despite the shift to polyester, the future of cotton is bright."

India, the second largest cotton producing country in the world after China, supplies 35 percent of Bangladesh's total demand.

A few years ago, like many other cotton exporters, India imposed a ban on cotton exports without any prior notice, which created volatility in Bangladesh market.

On the issue, Derossis said: "The rules are here to protect everybody. The rules are here to protect Bangladeshi spinning and textile mills so they receive quality products and make shipments in time."

He said the association encourages the spinners and shippers and others involved in the supply chain to follow the right path and rules.

Lea, the ICA president, talked about the stockpiling by a number of cotton producers that led to volatility in the global market a few years ago and pushed the cotton prices up.

He said the practice also troubles the association because it makes cotton less competitive as more and more users have opted for polyester and the synthetic form of fibres.

"We favour the situation where markets react to the forces of supply and demand."

He said, for the last four to five years, the world has been producing more cotton than it has consumed.

"So, there has been a surplus. Going forward, it is good news for the whole industry. The supply side is good."

Because of this surplus, spinners from Bangladesh and other countries will have a lot of options to import cotton.

"There is surplus in China and outside China. It is now a more balanced situation," Lea said, adding that the drop in prices will increase consumption, which might again pull the prices up.

By 2020, global consumption will go up to 130 million bales per year and production will rise at the same rate.

Lea said fibre consumption has soared because of the rising middle class across the world, especially in China and India.

"As a result, the opportunity for Bangladesh as a garment exporter has also become brighter."

At present, 115-117 million bales of cotton are produced worldwide every year, while the world consumes 110-113 million bales, according to Lea.

However, two years ago the surplus was 25 million bales, he said.

Lea praised Bangladesh for allowing its garment factories to go through rigorous inspection by foreigners following the Rana Plaza building collapse.

"There is no country in the world where every factory in every sector is 100 percent compliant."

As the Accord inspection shows that 98 percent of the factories are safe, it means Rana Plaza building is not typical of Bangladesh, he said.

"The most important fact is the way you have responded: you have not locked the gate when inspectors came in and rather opened it. Other standards have also been imposed. You are also meeting them." 

During their meetings with the ICA leaders, Bangladeshi spinners have complained that inadequate power is holding their growth back, according to Derossis.

"If the power shortage is sorted out then there will be tremendous growth in the textile industry," he said, adding that other infrastructure and port facilities have to be improved as well.

Hissam Khandker, a director of Delcot Enterprises Ltd, a local cotton trader, said the ICA also ensures that shippers sell quality goods at the right price and at the right time and honour their commitments with Bangladesh spinning mills.

He said the visit of the ICA leaders is itself a testimony to their trust on the Bangladesh's textile sector.

Derossis said the ICA is also working with the Better Cotton Initiative as part of an effort to ensure that cotton is grown in a sustainable way, which complies with agrifood practices, environmental standards and social responsibility.